ECB: Bias to Tighten
Ken Wattret
The ECB delivered the expected rate hike and left the door wide open for more of the same. The ECB played down the slowdown in growth and reiterated the upside risks to price stability, signalling a bias to tighten. We continue to expect a rate hike in October, teed up in September in tandem with higher inflation projections though this could be blown off course by market turmoil. The Q & A was dominated by issues related to the debt crisis with the ECB and some governments still at loggerheads over private sector involvement in the programme for Greece.
US: Back on the Chain Gang
Julia Coronado
Markets rejoiced Thursday at the June ADP report showing a better-than-expected pick up in private sector hiring. While the release has a dubious track record at best, the strength of the pick up—to 157k from 36k—led us to revise upward our forecast for nonfarm payrolls Friday to 125k from 75k. Labor market indicators have been mixed in magnitude and timing, but the message is the same; hiring conditions are weaker than earlier in the year but have improved modestly of late. The tone of the June employment report will set the backdrop for Chairman Bernanke's semi-annual monetary policy testimony before Congress next week, as well as the ongoing budget negotiations.
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